Only 3% down required from this conventional mortgage

Conventional 97 Program Requires Just 3% Down

Conventional 3% down payment program has been updated. Are you looking for a low down payment mortgage?  Do you want to buy a home for $429,600 and only want to put 3% down?  With our conventional 3% down or HomeReady home loans you can buy your dream home with very little down payment.

Conventional 97 is a program offered by Fannie Mae and Freddie Mac which allows for a 3 percent down payment, low mortgage insurance rates, and a 100% gift from blood or by-marriage relatives. At least one borrower on the loan must be a first time home buyer for the HomeReady Program but not for a regular 3% down. We even offer this loan with Lender Paid Mortgage insurance to help keep your payments as low as possible.

Another option is a Fannie Mae version called HomeReady and a Freddie Mac version called Home Possible, both offer even better payment options but are limited by income and requires Home-Buyer Education and Counseling. 

The three-percent-down payment mortgage program, for which the 3% down payment may come as a gift, is an excellent alternative to FHA loans. In many respects, it's more aggressive than the FHA's mortgage in that guidelines are simpler and less-restrictive.

FHA offers as 3.5% down payment and with VA and USDA, qualifying home buyers can buy with no down payment at all. What is the minimum down payment required with the Conventional 97 mortgage program?

The Conventional 97 program requires a 3 percent down payment. The 3 percent minimum is based on the lower of the home's appraised value or purchase price. 3 percent on a $200,000 home purchase is $6,000 for down payment.  Closing cost, tax and insurance escrows, and 1st years insurance is also do at closing but can be paid by the seller if negotiated.

Is the Conventional 97 program "cheaper" than an FHA mortgage?

Yes, in many cases, the Conventional 97 program is less expensive than an FHA mortgage. This is because the Conventional 97 program does not require an upfront mortgage insurance premium, and because its annual mortgage insurance rates are often cheaper, too. Mortgage rates are often comparable.

Can I use the Conventional 97 program for a mortgage refinance?

Yes, Fannie Mae allows homeowners to use the Conventional 97 program for rate-and-term refinances. If you plan to use the Conventional 97 to refinance a mortgage pre-dating June 1, 2009, however, consider the HARP refinance first. HARP is a mortgage for underwater homeowners and may offer better loan terms, overall.

What is the maximum loan size allowed with the Conventional 97?

The Conventional 97 mortgage program is capped at a $417,000 loan size in Texas.

What income documentation does the Conventional 97 mortgage program require?

The documentation requirements for a Conventional 97 loan are the same as for any other Fannie Mae-backed mortgage. Mortgage applicants should expect to provide recent paystubs, two years of W-2s and federal income tax returns; as well as the last two months of your bank statements and other relevant paperwork.

Can I choose the 15-year fixed rate mortgage with the Conventional 97 program?

Yes, the 15-year fixed rate mortgage rate is available to home buyers and refinancing households using Conventional 97. 

Is private mortgage insurance (PMI) required with the Conventional 97 mortgage program?

Yes, the Conventional 97 program requires that all borrowers carry mortgage insurance.

For how many years must I pay PMI via the Conventional 97 program?

The Conventional 97 program is via Fannie Mae, which means that PMI requirements follow Fannie Mae rules. Via the program, private mortgage insurance must only be paid until the home reaches 80% loan-to-value, and so long as 12 months have passed from the start of the loan.

Does Conventional 97 require upfront mortgage insurance, like an FHA loan?

No, the Conventional 97 program does not require upfront mortgage insurance premiums like an FHA loan. It only requires annual mortgage insurance, paid monthly, until such time as 12 months have passed and the home reaches 80% loan-to-value.

We offer a no mortgage insurance option as well.  Instead of paying the mortgage insurance each month we can buy it for the borrower and include it in the interest rate.  This usually increases the interest rate by one to three percent.

Another option is to purchase your mortgage insurance at a discount in one lump sum at closing.  Then the borrower will not have monthly mortgage insurance. This is best for borrowers planning to remain in the home and mortgage for greater than 5 years.

Does the Conventional 97 program require minimum credit scores?

Yes, the Conventional 97 program requires a minimum credit score, which varies by down payment source. All mortgage applicants must show a credit score of 660 or better. Your credit score is based on the middle of your three credit scores, as reported by the major credit bureaus TransUnion, Equifax and Experian.

Who does the Conventional 97 consider to be an acceptable "donor" for gift funds?

Conventional 97 restricts from whom a buyer can accept gift funds. Buyers can accept from a relative, which includes a spouse, child, or anyone else related by blood, marriage, adoption, or legal guardianship. Gifts may also be accepted from a fiance/fiancee or a domestic partner.

Does the Conventional 97 program enforce a maximum Debt-to-Income (DTI)?

Yes, the Conventional 97 mortgage program enforces a maximum DTI, which varies by down payment "source". Mortgage applicants making a down payment from their own funds may not exceed 43% debt-to-income via the Conventional 97 program. Mortgage applicants accepting gift funds for a down payment are limited to 41% DTI. Debt-to-income is calculated by dividing your total monthly debt obligations into your total verifiable monthly income.

How long does it take to close with Conventional 97 financing?

The Conventional 97 program takes no longer to underwrite than any other conventional mortgage.

My lender doesn't offer the Conventional 97 program. What do I do?

The Conventional 97 mortgage is a specialized program and is not available through via all mortgage lenders. If you've been turned down for the Conventional 97 mortgage by your primary lender, just apply again here. You'll likely find a different outcome.

How Do I Apply For The Conventional 97 program?

The Conventional 97 program is not a new program. However, it's a decidedly cheaper option as compared to the FHA. The Federal Housing Administration has raised its mortgage insurance rates so many times that its benchmark product has moved to second place.

If you're buying a home and plan to make a low down payment; or refinancing one and have little home equity, look to the Conventional 97 program. It's fast, it's cheap, and the rates are great.